Ireland: investment consulting comes into its own
Asset consulting has come into its own in Ireland, says Paul O’Faherty, head of the investment practice with Mercer in Dublin. “We are seeing it as a recognised activity on its own, where before it would have been embodied in other areas.”
Irish consultants, led by his firm, have developed teams concentrating full time on investment. “We have a team of around 15, which includes six consultants, and this has grown from six some three years ago.” Also, investment work no longer goes automatically to the firm providing the actuarial advice, which it would have done say four years ago, he adds.
O’Faherty, a former chairman of the Irish Association of Pension Funds, regards this as proof of the growing sophistication of the Irish pension market, which is changing from its traditional balanced approach to a more specialist one.
Mercer acknowledges its dominance of the Irish consultancy market, which has been put by others at over 50% of the total pensions market or around 75% of the top end of the market, but is coy about putting a figure on it. “The share of the market we have is substantial, but in a market that is evolving as fast as the investment consulting one, it is impossible to calculate market share.”
But he is adamant about the professional approach taken when it comes to manager selection. “We work very hard to demonstrate our even-handedness.” But he acknowledges that initially, after the merger with Sedgwicks two years ago, there was understandable nervousness, which he feels has been dispelled.
Where Mercer may be giving the lead, he says the traditional competitors in the market compete hard (see page 5). “We have solid competitors, but we win our share,” says O’Faherty. He reckons that with the size of the investment consultancy practice that Mercer has in the country, it can develop a level of expertise that would not have been possible otherwise, which can lead to faster development of the market, which is good for the market.
But some local asset managers see the potential dangers from the dominant position – however well Mercer manages it at present – commenting sotte voce that there does not seem to be much challenge coming from the other international firms. Both Bacon & Woodrow and Hewitt are active in Ireland, but their merger is not seen as likely to change the dynamics of the marketplace. Nor is there any sign of new comers emerging to be challengers.
But with an expanding marketplace and probably more work than they have the staff to cope with, most consultants appear to have their plates full to overspill.
The Irish pensions industry has to see that pensions coverage increase over the next few years and the consultants will have a crucial role when the legislation rolls out the Personal Savings Retirement Account, an individual third pillar plan, that will have a corporate version to be provided by employers. “Many employers are holding back making decisions until the see the new vehicles,” says Joe Byrne of Coyle Hamilton in Dublin, Ireland’s second largest pensions consultancy. But he thinks there will be plenty of opportunities for consultants to add value and to help clients keep their costs to a minimum.
With the development of DC business generally, he observes “many say that actuaries could be out of business as a result, but the opposite could be the case, with the need to do individual valuations and the management of this pensions wealth. DB is simple by comparison.”